They just don’t get it

“On Feb. 29 the World Bank announced that the proportion of the planet’s population living in absolute poverty—on less than $1.25 a day—had halved from 1990 to 2010. That rate of poverty reduction is unprecedented, driven by rapid rates of economic growth in poor countries from China to Ghana.”

Wow! That’s awesome. Unprecedented poverty reduction. Halving the poverty rate across the planet in the course of 20 years. Wow! That’s awesome.

But, no! Not to the hacks at Businessweek. Here’s the remainder of the paragraph and essentially the next two pages of the article:

“Yet despite the huge progress against poverty worldwide, inequality—the gap between rich and poor within countries—has been expanding. Recent analysis by economists Isabel Ortiz and Matthew Cummins at Unicef suggests about two-thirds of all countries have become more unequal over the past two decades.”

So what!?!?!? So what if the gap is expanding. The poor are getting richer and the rich are getting richer. This is a good thing! The gap doesn’t matter!

There are lots of reasons why the rich get richer faster than the poor. One of those reasons is pure mathematics:

3% (say, in interest, or return on investment) of $100 is $3

3% of $1M is $30,000. So yeah, bank accounts that are big will get bigger faster. This is just pure math – nothing unfair or unequal or having to do with education levels or having to do with ANYTHING OTHER THAN MATH!

2 comments

Great piece. You may like Gregg Easterbrook’s book, The Progress Paradox, which looks at the point you raise – real incomes of the poor have roughly doubled in the past 50 years, crime is down, lifespans and wellbeing are up, but yet people still hearken back to “the good old days”. Which, by almost any measure, were not in fact better.

The key difference in the BusinessWeek article is “should the gap matter”, not “does the gap matter”.

People are highly motivated by a sense of “fairness”, however fair or not fair that sense may ultimately be, and will work against their own self-interest to achieve it. I believe that this phenomenon is a big driver in the kerfluffle about widening income inequality.